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Adviser banned by ASIC for failing to act in the best interests of clients

Court agrees case may proceed against insurer and adviser

Liz McDonald at The ChristChurch Press picked up this story (click here to read more).

After Janine Brinsdon's house suffered $350,000 worth of damage during the Christchurch earthquakes, she decided to take on her insurance adviser and insurance company, claiming that her house was under-insured. Although Vero and Graeme Beazley attempted to dismiss the claims of providing defective advice, claiming that it was outside the six-year limitation period, the high court has ruled that the case can proceed.

Brinsdon replaced her existing full repayment cover policy with her current policy in 2001. When insuring her house, Vero had concluded that her insurance would pay a maximum of $223,143, less the amounts paid by EQC. Brinsdon claims that she was unaware that she was not completely insured until Vero made an offer in 2015.

Associate Judge Peter Andrew has stated that the policy wording is misleading, claiming that a reasonable person would have assumed that the insurer would pay the full amount of the cost of replacing the house. Furthermore, he has said that it is fair to conclude that the defendants knew that Brinsdon was unaware of the scope of her cover and that she was not advised when renewing her cover in 2010.

Brinsdon is seeking to hold Beazley accountable for breach of contract as she believes that he did not take the reasonable care. Beazley argues that there is no basis of claiming that he had an on-going duty to her. In defence to the claims made by Brinsdon, Vero stated that they also did not have on-going obligations, especially  since Brinsdon had not sought advice.

The case raises numerous questions for the advice process, the role of the financial adviser, and the perceptions of clients. Many clients probably assume an ongoing obligation of service when none has been specified or contracted with their adviser. Consumers are probably unfamiliar with the distinction between meeting an adviser, and actually obtaining financial advice. Also, this case appears to raise questions not just under financial advice law, but also under consumer protection law. The question of whether the insurance was fit for purpose has been raised. This is particularly interesting given the recent options paper released by MBIE on the conduct of financial institutions. 




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